Emerging markets in Europe have been on a tear recently. Ask Julian Mayo, who manages U.S. Global's Eastern European Fund (EUROX), why that's so, and he'll tell you it's a result of those markets' inefficiencies. "Even in big companies, one can have 'Eureka!' moments when finding things the market has not discovered," says Mayo, who works for Charlemagne Capital, the fund's subadvisor, in London. "The satisfaction of this type of discovery, not to mention the potential for gains, is very rewarding."

Having a fund manager located in Europe and the company's keen ability to pick stocks are behind the stellar performance of the Eastern European Fund. This five-star Morningstar fund was up 32.8 percent at the end of 2006, and its total return has averaged nearly 44 percent over the past five years.

With 40 to 50 stocks in the fund, the heaviest weightings of assets at year-end 2006 went to companies in Poland, Russia and Turkey. Favored investments include Russia's Sberbank, along with the Russian cell phone sector and financial companies.

Why look at emerging markets? "[They] account for 85 percent of the world's population and almost 40 percent of the world's GDP adjusted for purchasing power parity, yet are less than 8 percent of the world's stock market capitalization," says Mayo. All of which spells opportunity for investors.

Though risks mainly center around currency and emerging-market volatility, upholding a well-diversified portfolio can help lessen the pressure of the risks.

Dian Vujovich is an author, syndicated columnist and publisher of fund investing site www.fundfreebies.com.